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Jewish World Review Feb. 20, 2001 / 27 Shevat, 5761

Small Business Advisor by Paul Tulenko

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Consumer Reports

Tax tips for small business owners -- THERE'S bad news, and then there's good news. The bad news is that no matter who's president, you still have to go through that agonizing project called "doing taxes."

Now for the good news! First, the IRS is understaffed this year, and unless you are egregiously greedy, your chances of an audit are down ... way down. Yes, there will still be audits, but we small businessmen and businesswomen will not be targeted as we have been in the past.

The second bit of good news concerns deductions. You have the right to use any deduction from your taxes that is permitted by the tax code. Any! This means you can be very aggressive in what you deduct, and so long as you have proof that you are permitted to take the deduction you will survive any audit that might occur.

It's the proof that's important, so here are three tax books, several software programs and a bit of advice you need to make aggressiveness pay off for you: "101 Tax Saving Ideas" by Randy Gardner and Julie Welch is an easy-to-read book that has a number of great ideas for writing off things like how to avoid having your home-based business classified as a hobby (tax idea 71), how to hire your children in your business (tax idea 78), or how to look at the after-tax values when dividing property in a divorce (tax idea 91).

Of course, you need an understanding of the IRS rulings to justify the above should you be one of the unfortunate to receive an audit, so I also recommend you purchase either or both of the tax books that are the backbone for understanding. They are: "CCH Business Owner's Toolkit Tax Guide 2001" by Susan M. Jacksack and "J.K. Lasser's Taxes Made Easy For Your Home-Based Business" by Gary W. Carter. The CCH book is more valuable when you're trying to figure out the taxes you absolutely must pay right now, and those you can avoid ever having to pay. Lasser's book has the same material (after all, they both cover the tax code), but is written a bit more conversationally, so it's easier to read. The Lasser book will also be invaluable to any start-up you plan for next year.

Next comes the calculation of how much you really need to pay. The question I get asked the most is, "Should I hire a CPA, a bookkeeper, one of the big tax firms, buy some software that can help me, or do it myself?" Here are my recommendations:

Hire a CPA who specializes in your business, but make sure he is aggressive in this approach or you will end up paying more taxes than you need to pay. Bookkeeping firms and bookkeepers are great for record keeping chores, but use caution in allowing them to calculate the taxes you owe. Bookkeepers and bookkeeping services are not required to keep up with the tax code through continuing education. This education is a requirement for CPAs.

You certainly can go to one of the nationally advertised tax preparation firms, but don't just walk in and plop your records on the table; do a bit of homework first. Most of these firms are a bit on the conservative side, so make a phone call and ask for the names and phone numbers of the CPAs that work for them during tax season, check these people out for aggressiveness with another phone call, then ask the most aggressive person to do your taxes.

As far as doing it yourself, don't ... unless you use one of the really effective software packages available such as Intuit's Quicken TurboTax For Business ($69.95 after rebate), Quicken TurboTax For Home and Business ($49.95 after rebate), Quicken TurboTax Deluxe ($29.95 after rebate) or Quicken TurboTax ($14.95 after rebate). There's even a Quicken TurboTax for the Web with variable pricing for variable services that's terrific.

If you've just got to do it yourself, it's my opinion that Intuit has the best tax preparation programs available anywhere. A word of caution. About this time of year you'll see a lot of books and manuals that advertise they can "eliminate' taxes," "help you get more money back," or something similar. Some of these publications stretch aggressiveness to something approaching stupidity, and if you follow some of the ideas presented you are just begging the IRS to audit you.

Actually, the books are fun to read and may trigger you to look up the rules in one of the more dependable books to see if you could benefit, but be smart, not audited.

Paul Tulenko is the coordinator of the Small Business Development Center in Albuquerque, N.M. Comment by clicking here.


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